In the case of Nu at the time, it was nonsensical to withhold funds from the peg with the goal of defending the peg. Is there any scenario where it does make sense?

Withholding funds from the peg or devaluing the currency by widening its spread will spook customers and make them want to reduce their holdings in the now unpredictably supported currency.

There was no other available resource for peg support than utilising the established Tier 6, i.e. NuShare sales.

What FLOT should have done is begin NuShare sales as soon as park rates were determined insufficient. By selling NuShares before trust in the currency is broken, impact to NSR market cap is minimized (which is not to say made insignificant). The NuShare value would likely have decreased whichever action was taken. Even with the market understanding that NuShares being sold is an intended dynamic for the situation it would possibly be pushed down an uncomfortable degree the first time.

Investors not already heavily invested will likely withdraw support from a company that abandons its product, in Nu’s case the peg.

It’s possible @JordanLee’s motion to fire incompetent liquidity providers triggered the bank run with controversy (though the peg was already shaky days before). It’s possible he sold private NuBits and broke the peg at that point. None of that is a cause to condemn @JordanLee. The deeper issue here is what the motion made apparent, that liquidity wasn’t being provided at the tight spread customers had been promised.

Go back and read the motion. It makes perfect sense and isn’t at all as negative as I initially perceived it.

FLOT failed to acquire sufficient BTC to support the buy side. The group had never dealt with this situation before and lacked understanding of important dynamics involved. That led to widening of spreads and withholding of funds to desperately try slow down exiting customers.

A fear of utilising Tier 6 led to depleted Tier 1–4 and the broken peg.

It’s possible @JordanLee’s motion to fire incompetent liquidity providers triggered the bank run with controversy (though the peg was already shaky days before). It’s possible he sold private NuBits and broke the peg at that point. None of that is a cause to condemn @JordanLee.

Let’s go back a bit further, as that motion came after a number of events in the months before. The motion to fire people was partially the result of a flawed model with the wrong incentives for shareholders and the lack of positive incentives for liquidity providers to the right job in tough times.
The other reason which became clear months before was that not enough sales were achieved to pay for the decentralised liquidity engine and attract professionals to run sustainable operations. The costs were too high and dividend was paid out when there was no real profit only liabilities and low reserves. I believe the lack of sales was mainly because of the lack of trust by many initially interested due to the facts that only 15% reserve was held, the anonymity of key members, the high cost of decentralised liquidity provisioning and the lack of a development fund or an ongoin funding source for it.

The firing off the motion and emotional wording of it and subsequent mud throwing triggered panic. This might have been deliberate. Reasons could be to clean the ship (the firing), or recognising that something was flawed in the model and change was required. With the latter all kinds other incentives and emotions might have been at play which led to the sale of a large amount of NuBits creating even a bigger problem and the loss of the peg and loss for all Shareholders.

I still think that 48% reserves for the peg is tight, in particular because there is no separate fund for development or other operational cost or an identified funding source to make the operation sustainable. I believe that doing buybacks without investing first in development and operations is not the correct order and would only attract those who are in for a quick buy and sell and not those far more valuable shareholders who would go long.